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Saturday, 16 May 2009

Improbability and Statistics

Have you ever wondered how the national statistics are compiled, such as for example, the retail sales that get quoted every month. I always imagined that there was once a team of researchers armed with clipboards, later followed by civil servant who would ring round all the major retailers. With a bit of technology and sophistication perhaps they could have cross-checked the figure with some numbers from the credit card companies and the bank cheque clearing systems.

Surely nothing more than a bit of totting up, and certainly not numbers that were calculated,e extrapolated or worse still made up?

It seems not, or at least not that simple because the Office for National Statistics has just admitted that the cheery retail sales that they have been passing to the BBC to regale us with over our Rice Krisopies have overstated the growth in retail sales for the last two years by 56 per cent.

Apparently many economists have expressed concerns in the past that the ONS numbers didn't look right, prompting Karen Dunnell, the national statistician, to write to newspapers last year, stating that the the ONS numbers were "the best available" and "not inaccurate”. She also said that many of these economists were linked to city analysts who "have a vested interest in not being proved wrong”. She also described statistics from the CBI or the British Retail Consortium as not “fit for purpose”.

The ONS have now reduced their figure for the growth in retail sales between August 2007 and March 2009 from 3.6 per cent to 2.3 per cent.

It seems that the problem was that the ONS figures did not take account of the fact that consumers were likely to switch between products where price differences had widened.

But hang on. What has the price of individual goods got to do with overall sales data? Surely retail sales is simply a matter of adding up, no? If M&S reports £15 of sales it doesn't matter whether it comes from 4 pairs of socks, 3 pairs of knickers or a bottle of Chilean red wine and a take away sandwich. Apparently not. The ONS seem to have devised a more complex method for making up the statistics than adding up the cash that passes through the tills, and fallen foul as a result.

Still, it looks like retail sales of humble pie should be up this month.

1 comment:

There are a lot of figures from the ONS that do not add up for very many people. The mess of calculating living costs is one. There is talk of "deflation" when for large groups of the population living costs are going up sharply, these just are not built into the figures. Another area is the recording of deaths often used for health policy purposes. In many cases these are just the most convenient way of filling in the forms, because, especially amongst the old, so little actual testing is done or treatments given. In addition, the figures are only as good as the sources and the analysis. When you get duff figures, and hasty analysis it is rubbish. Garbage in, garbage out, and too much of the ONS work is precisely this.

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